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Home / Business / Goldman Sachs reports lower earnings and sales

Goldman Sachs reports lower earnings and sales



Goldman Sachs Group
Inc.


GS 1.18%

quarterly earnings fell 6% as the cost of Wall Street Bank's alignment with Main Street began to weigh.

Goldman earned $ 2.42 billion or $ 5.81 per share on revenue of $ 9.46 billion. Both were lower than a year ago, but surpassed the subdued expectations of Wall Street analysts.

Revenue declined, but spending declined as Goldman continued to spend money on new initiatives such as retail banking and corporate cash management. The bank has already pushed up the cost of these investments on Tuesday: a pre-tax loss of $ 1

.3 billion. This represents approximately 15% of the Bank's annual profit and has reduced Goldman's return on equity by 0.6 percentage points in 2019.

Nevertheless, the stock rose on Tuesday afternoon by as much as 2%, trading for the first time since January, according to the bank, with the value of everything it owns minus what it owes. Chief Executive David Solomon also pledged investors to provide more accurate and transparent information to the company, thereby violating Goldman's trademark secrets.

Mr. Solomon, an investment banker who replaced longtime trader Lloyd Blankfein last fall, is changing the company in a different way. Goldman collects deposits from consumers and launches a common credit card

Apple

Inc., building asset management capabilities and opening the company's private investment funds to third-party funds. The goal is to turn Goldman from a trading and dealmaking powerhouse into a more rounded company

JPMorgan Chase

& Co. or

Citigroup

Inc., both of which posted higher quarterly gains against the background of their huge consumer and commercial lending business.

It's only going slowly. Stephen Scherr, Chief Financial Officer, said that some of these new businesses will take up to five years to generate profits. Today, the company still relies heavily on its traders and investment bankers, which is why it is more exposed to uncooperative markets such as the second quarter than its competitors, as tensions escalated and the Federal Reserve surprised the markets by signaling that they were more likely to weaken the markets could weaken as you continue to increase the interest rates.

The banks' trading departments are well positioned when clients judge the direction of stock prices, interest rates and other assets confidently enough to make high stakes. Insecure investors tend to hold back rather than risk a loss.

Goldman's quarterly trading revenues decreased 3% year-over-year. This is due to a 13% decline in bond trading, which includes bonds, currencies and other interest-bearing products as well as global economic indicators. These traders generated $ 1.5 billion in quarterly revenue, compared to $ 6 billion a decade ago.

In stock trading, a more stable business where banks can earn fixed commissions, regardless of the direction of prices, the situation has improved. Revenues increased 6% to $ 2 billion, down 12% at JPMorgan and down 9% at Citigroup.

Goldman has been investing heavily in its equity business since it was eclipsed by being number one in this segment

Morgan Stanley

Five years ago. Better algorithms and technologies are being developed that allow trades to be reconciled internally instead of passing them on to a stock exchange, saving money. The exchange and brokerage fees increased by only 1% in the quarter, slower than revenue from equities.

Morgan Stanley will post a quarterly profit on Thursday, the last major US bank.

Goldman's investment bankers, who broker mergers and help companies raise funds through securities offerings, saw a 9% decline in sales. Subscription fees declined 12%, in line with JPMorgan, reflecting a decline in underwriting volume. It is possible that companies are holding back on new debt and expect interest rates to fall over the course of this year.

Mergers fees were 3% lower than a year ago, but increased by 20% this year. The bank earned a $ 35 million payday a year ago with the largest deal completed in the quarter, the merger of arms companies L3 Technologies Inc. and Harris Corp., when it generated an above-average share of private equity gains – and hedge fund investments it monitors.

Goldman seeks to build wealth management, a more steady, fee-generating business that has benefited from the decades-long bull market. On Tuesday, Goldman entered into a May contract to acquire United Capital, a network of financial advisors who manage approximately $ 24 billion for wealthy individuals.

Write to Liz Hoffman at liz.hoffman@wsj.com

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